Whether a non-signatory can be bound by an arbitration agreement?

Arbitration as a mechanism of dispute resolution is premised on the principle of the party autonomy, which can be enforced only against the signatories to an agreement as stipulated in Arbitration and Conciliation Act, 1996 (“the Act”). However, challenges arise when there is a non-signatory sharing a commercial relationship and/ or is involved in the transaction in any capacity with the signatories to an arbitration agreement.

The jurisprudence on this issue has significantly evolved through a series of landmark judgments. The Supreme Court of India, recently in ASF Buildtech v. Shapoorji Pallonji & Co. Pvt. Ltd. (2025) SCC Online SC 1016 (“ASF”), was once again faced with the question, whether a non-signatory could be impleaded as a party in a pending arbitration. However, before discussing the above judgment, it is important to discuss the earlier developments that took place on this issue.

Supreme Court of India dealt with the issue of impleadment of a non-signatory way back in 2013, in Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. (2013) 1 SCC 641. In this case, the Court interpreted Sections 8 and 45 of the Act, especially the phrase in Section 45, i.e., “parties or persons claiming through or under him” as a party. The Court concluded that in cases involving a composite transaction with multiple related agreements, a non-signatory could be referred to arbitration if it was evident that the parties intended to bind the non-signatory as well. The Court applied the “Group of Companies” doctrine, allowing impleadment of non-signatories in exceptional cases.

The 246th Law Commission recommended an amendment in Section 2(1)(h) and Section 8 to insert the phrase “person claiming through or under such party”, to make them in consonance with Section 45. The Legislature, accordingly, introduced an amendment in 2015, wherein Section 8 was amended to read as “a party to an arbitration agreement or any person claiming through or under him,” expanding the scope of expression ‘party’. However, Section 2(1)(h), which defines the term ‘party’, was somehow kept unamended.

Subsequently, in ONGC Ltd. v. Discovery Enterprises (2022) 8 SCC 42, Supreme Court of India laid down the following cumulative factors to be considered for determining the involvement of a non-signatory: (1) mutual intent of the parties; (2) relationship of a non-signatory to the signatories; (3) commonality of subject matter; (4) composite nature of transaction; and (5) their role in overall performance of the contract.

Post amendment, Supreme Court of India considered the validity and applicability of “Group of Companies” doctrine in Cox & Kings Ltd. v. SAP India Pvt. Ltd. (2023) SCC OnLine SC 1634. The Court disagreed with Chloro Control (supra) holding that it was not right to include a non-signatory as a party by infusing the Group of Companies doctrine into the expression “claiming through or under” appearing in Section 45 of the Act.

The Court also referred the judgment of Discovery Enterprises (supra) and primarily settled the following:

• “party” defined under Section 2(1)(h) includes both signatories and as well as non-signatories;

• A non-signatory can only be bound to an arbitration agreement where its conduct indicates its consent;

• The requirement that an arbitration agreement must be in writing does not preclude binding non-signatories;

• Group of Companies doctrine is a distinct legal principle that arose from a combined reading of Section 2(1)(h) and Section 7 and was not dependent on doctrines like ‘alter ego’ or ‘piercing of corporate veil’;

• Group of Companies doctrine should not be applied merely because companies are part of same economic unit, as each company is a separate legal entity;

• Courts and Tribunals must assess all the cumulative factors laid down in Discovery Enterprises (supra), to determine whether there is a common intention to bind the non-signatory to the arbitration agreement;

• The linking of Group of Companies doctrine to the phrase “claiming through or under” in Chloro Controls (supra), was incorrect. However, the doctrine is an important one alongwith other doctrines to determine the intention of the parties;

• In complex transactions involving multiple agreements and parties, the doctrine may be a relevant consideration but, the question whether a non-signatory is bound by the arbitration agreement should be left to the Arbitral Tribunal to decide.

Further, in Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors. (2024) SCC OnLine SC 2597, the Supreme Court after a detailed discussion again upheld the principles laid down in Discovery Enterprises (supra). The Court concluded that the intention of a non-signatory to be bound by the arbitration agreement has to be understood from the circumstances surrounding the participation of such party at various stages including the negotiation, performance and/ or termination of the contract containing the arbitration agreement.

In the case of ASF Buildtech (supra), the Court again discussed the importance of application of Group of Companies doctrine and the circumstances under which a non-signatory could be impleaded in an arbitration between the signatories. Additionally, this judgment also dealt with an important legal question, whether an arbitral tribunal has the necessary powers to implead a non-signatory as a party in a pending arbitration.

There was a works contract executed between Black Canyon SEZ Pvt. Ltd. (“BCSPL”) and Shapoorji Pallonji & Co. Pvt. Ltd. (“SPCPL”), which contained an arbitration clause. Subsequently, a settlement agreement was executed between the two entities, but further disputes led BCSPL to initiate arbitration. SPCPL filed counterclaims against BCSPL as well as against two related ASF group entities, i.e., ASF Buildtech Pvt. Ltd. (“ABPL”) and ASF Insignia SEZ Pvt. Ltd. (“AISPL”), invoking the Group of Companies doctrine. The entities challenged the jurisdiction of the Arbitrator to entertain SPCPL’s counterclaim against ABPL and AISPL under Section 16 of the Act. The Arbitrator, however, rejected the applications, citing their involvement in the project as was evident from the correspondence. The Delhi High Court upheld the decision, finding that ASF group had assumed the responsibility for payments and for implementation of the Project. The Court finally directed the claim and counterclaims to be treated as a single arbitral proceeding. Aggrieved by the above, ABPL challenged the same before the Supreme Court of India.

Supreme Court of India framed the following question of law: 

“Whether an arbitral tribunal has the authority or power to implead or join a non-signatory to the arbitration agreement as a party to the arbitration proceeding?”

The Court dismissed the appeal and upheld High Court's decision, observing that the correspondence exchanged between SPCPL and ASF group was made by the ASF group as a whole, and thus, an admission of liability by the ASF group to honour its obligations under the Settlement Agreement stood established. The Court further observed that since the Arbitrator was competent to determine existence of an arbitration agreement between the parties, it was capable and competent to identify and implead a non-signatory as a party. Reiterating the principle in Cox and Kings (supra), it held that being a signatory to the arbitration agreement is not mandatory for impleadment. The Court also rejected the contention regarding non-issuance of notice under Section 21 of the Act, holding that such notice was necessary only for signatories while initiating the arbitration, and not for non-signatories, while relying on Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. & Ors. - (2025) SCC OnLine SC 806.

In an interesting case of AC Chokshi Sharebroker v. Jatin Pratap Desai - (2025) 5 SCC 321, the Court came across the case of impleading an individual non-signatory. The Arbitrator held that there was an oral agreement between the husband and the sharebroker that the husband and wife, both, would be jointly and severally liable for the transactions in both the accounts. The Supreme Court upheld the award in favour of the sharebroker and reiterated that a non-signatory’s impleadment depends upon the conduct of the party as well as the composite nature of the transaction.

Despite several landmark judgments, the issue of impleadment of non-signatories in arbitration proceedings remains procedurally unsettled under the statute. The judiciary has attempted to clarify and evolve jurisprudence through the application of various doctrines viz the Group of Companies doctrine, doctrine of alter ego, piercing the corporate veil, etc. However, the Act still pose legal challenges in case involving complex transactions involving multiple disputes. Notably, the Arbitration and Conciliation Bill, 2024, remains silent on the critical issue of impleadment of non-signatories to an arbitration proceeding.  

About the authors: Abhishek Kumar is a Partner and Pragun Dua is a Senior Associate at Singhania & Partners.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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